Top ride-hailing firms experiment with subscription models to retain drivers and tackle competition

Changing market dynamics

App-based aggregators Ola and Uber launched their services in 2012-2013 and initially promised lucrative monthly earnings, even enticing white-collar employees to become drivers.

However, over the years, app-based aggregators have faced driver discontent after the initial promised incentives came down and platforms started imposing commissions. To be sure, these commissions play a pivotal role in managing the platform, maps, and other expenses. Platform charges are one of the key sources of revenue for these platforms.

Drivers are getting attracted by the ‘zero-commission’ model promised by new-age ride-hailing firms such as Namma Yatri, Myn and Yaary.

According to cab unions that Moneycontrol spoke to, Ola and Uber are now facing stiff competition in Hyderabad. This is after the launch of Yaary, Namma Yatri, Volta, and Ok Chalo in the city.

"After the launch of these four firms, which promised a zero commission model, many drivers from Ola and Uber have shifted to these platforms. When drivers are not available in an app, customers will also shift. The presence of more commission-free aggregators is good for the drivers," said Shaik Salauddin, National General Secretary, and co-founder of the Indian Federation of App-based Transport Workers. IFAT is a federation of trade unions representing ride-sharing and other gig transport workers.

Demand for zero commission

The zero-commission model became an attractive proposition for the driver community, which was disgruntled with Ola and Uber charging at least a 30% commission on each ride.

In November 2022, Namma Yatri, an app developed by Juspay per standards defined by the Open Network for Digital Commerce (ONDC), was launched as an alternative to Ola and Uber. The USP: zero commission.

The app has become popular within a year and has on-boarded more than 1.09 lakh registered drivers in Bengaluru, according to the Namma Yatri website.

However, running an app on this scale requires money, throgh continuous infusions. So far, Namma Yatri’s operations have been backed by the Nandan Nilekani-led non-profit Foundation for Interoperability in Digital Economy (FIDE), and built by Juspay.

Also Read: Spotlight on zero-commission models after Namma Yatri, auto union break tie-up

But as adoption grows, costs, like those for quality engineering, R&D, marketing and even on the maps used in the app, grow. Google Maps, for instance, is free for individuals but not for businesses.

Namma Yatri did have a plan: to use open-source apps, something it eventually planned to switch to in order to save costs.

But an app such as Namma Yatri still needs capital to sustain operations and that’s when the company decided to introduce a subscription model for drivers. It has been collecting a subscription fee since September 1, 2023. Drivers have two options under the plan: Rs 25 for unlimited trips per day or Rs 3.50 per ride (no charges after 10 trips).

"We announced in February 2023 that we would charge drivers a nominal subscription fee, and the same was updated on our website...Since then, we have conducted extensive surveys to understand drivers’ preferences," said a spokesperson from Namma Yatri, in response to Moneycontrol's queries.

In 2022, Myn, the ride-hailing part of a mobility superapp, became one of the first aggregators to implement the zero-commission model.

"One of our marquee features is on-demand rides, where we applied our principles to pioneer the no-commission thought process in the industry, as the mobility world believed there was no other model that could be profitable," said Abhisyant Anasapurapu, co-founder & head of operations at Myn.

"We decided to impose a flat fee on the end user: Rs 24 per cab ride and Rs 12 per auto ride (including GST), charging drivers nothing. This fee remains constant regardless of the distance of the ride," added Anasapurapu.

Similarly, Drife, a block-chain based mobility app, also promises drivers a zero commission model.

"Drife will continue to support the Driver community by offering the best of ride-hailing technology without any commission being charged on rides.The subscription based model introduced by us will be the benchmark for all ride-hailing apps," Firdosh Sheikh, CEO of Drife, told Moneycontrol.

Following this, Rapido has also launched subscription services and started promising zero commission.

Hyderabad-based Yaary, which was recently launched on ONDC, said that the SaaS model will be a benefit for drivers.

Also Read: Hyderabad auto, taxi drivers hitch ride on ONDC to launch ride-hailing app Yaary

"In a SaaS model, one pays on a pay-as-you-go basis. Yaary brought this revolutionary pricing model for mobility in Hyderabad where drivers avail of the full technology services offered by Yaary. They only pay a nominal SaaS subscription fee to use the technology," said Paritosh Verma, Chief Business Officer Yaary. "Unlike aggregators who charge a commission model, drivers enjoy 100% of the earnings for themselves and pay only a nominal subscription fee (SaaS fee)."

The Yaary platform is free to use for drivers up to a certain quantum of rides. They would pay a nominal fee only after crossing a minimum of 5 rides.

Will drivers benefit?

The driver community is divided when it comes to realising the benefits of a subscription model.

“I recently moved from Ola and Uber to Namma Yatri. I find using Namma Yatri is much more beneficial. I have subscribed and the money gets automatically deducted from my UPI. This is much better for me than paying around 20-30 percent commission to others,” said Keerthivasanth L, an auto driver from Bengaluru.

K Somashekar,  leader of the Karnataka Rajya Chalakara Parishath, added, "Both Ola and Uber are currently charging around 26 percent commission. However, it would be beneficial if the commission could be reduced to 5-8 percent. We have heard that Namma Yatri will be introducing cab services in the city without imposing any commission, but we have not received any information on this yet. We are also awaiting the launch of an app by the Karnataka government to ensure that drivers are not exploited".

Some of the drivers have said that there is no visible benefit as rides on Namma Yatri are for shorter distances.

“We are seeing that people who hail rides on Namma Yatri travel less than 10 km. A subscription fee is not a big moneysaver, according to me,” said a driver, requesting anonymity,

Tanveer Pasha, president of Ola Uber Drivers and Owners Association has raised concerns over the automatic deduction aspect. "Ola-Uber charge around 30 percent commission, so the subscription model is cheaper for drivers. However, aggregators like Namma Yatri are forcing them to link drivers' UPI accounts, and the amount gets automatically deducted daily. We suspect that zero commission models are a ploy to attract drivers and capture the market so they can raise funds,” he said.